Overview

Currently, Uruguay stands out in Latin America for its success as an equitable society and its high per capita income, low poverty rate and absence of extreme poverty. As a percentage of the total population, Uruguay has the largest middle class in the region. It has achieved high ratings on several measures of well-being, such as the Human Development Index, the Human Opportunity Index and the Economic Freedom Index. 

The stability of the country’s institutions and low levels of corruption are reflected in the high level of citizens’ trust in government. According to the World Bank’s Human Development Index, Uruguay has achieved a high level of equal opportunity in terms of access to basic services such as education, clean water, electricity and sanitation.

In July 2013, the World Bank ranked Uruguay as a high-income country with a gross national income per capita of US$ 13,580. With an average annual growth rate of 5.2 % between 2006 and 2014, Uruguay’s strong economic performance has enabled the country to withstand external shocks.

Uruguay’s economic growth over the past decade was inclusive and led to a significant reduction in poverty and the expansion of shared prosperity.

Moderate poverty declined from 32.5% in 2006 to 9.7% in 2014, whereas extreme poverty has practically disappeared: from 2.6% to 0.3% during the same period. In terms of equality, the income of the poorest, 40% of the Uruguayan population increased 6.8% between 2004 and 2012, in other words, 2.2 percentage points more than the average income of the total population. Inclusive social policies have increased coverage of social programs. For example, approximately 87% of the population over age 65 is covered by the pension system: this figure is among the highest in Latin America and Caribbean, along with those of Argentina and Brazil.

The sound macroeconomic performance also was reflected in the labor market, which recorded historically low unemployment rates in 2014 (6.6 %).  Moreover, export markets have diversified in an effort to reduce dependency on the country’s main trade partners (in 2000, 80% of export revenue originated from 14 markets; in 2012, the same percentage was distributed among 19 markets).

Uruguay implements prudent macroeconomic policies. Annual GDP growth was 3.5% in 2014. The gross public debt ratio experienced a marked declined (63.6% of GDP in 2014 versus 75% in 2006), as did the net ratio (21.6% of GDP in 2014 as compared with 70% a decade earlier).

Despite significant advances in reducing the debt, it remains relatively high. While Uruguay has diversified trade, a large share of exports (20%) still goes to its regional partners, mainly Brazil, placing the country in a vulnerable position.

For more information on Uruguay, visit the World Bank’s Open Data site.

Last Updated: Apr 20, 2015

The World Bank has supported the development process in Uruguay for more than 60 years with a variety of instruments, including loans, insurance, grants, studies and knowledge sharing.

The work program for 2010-2015 is based on four main pillars:

  • Reducing macroeconomic vulnerability and strengthening the public sector administration.
  • Improving competitiveness and infrastructure.
  • Protecting the environment, mitigating the effects of climate change and strengthening family farming.
  • Promoting inclusion and social equity.

Currently, the World Bank and the Government of Uruguay are working together to develop the guidelines for the 2015-2020 Country Partnership Strategy, which will be submitted to the World Bank’s Board of Directors this year.

In Uruguay, the World Bank group has a portfolio of 10 projects totaling US$ 990 million. Of these operations, six (US$ 204 million) are investment projects. Additionally, a US $66 million results-oriented project is underway for road construction and maintenance. The country also has a US $200 million investment loan with a deferred drawdown option (DDO), which will be activated in the event the country experiences adverse climate events. Finally, two projects for US$ 520 million are development policy loans, commonly known as contingent credit, which have not yet been dispersed. Contingent credit played a role in improving Uruguay’s credit risk, which achieved investment grade in early 2012.

The project portfolio is complemented by grants totaling US$ 5.5 million and non-reimbursable technical assistance. The World Bank also carries out analytical studies on water resource management and logistic chains for grain exports, among others.

 

Last Updated: Apr 20, 2015

For the past 62 years, the World Bank has worked with several Uruguayan governments in areas such as infrastructure, transport, agriculture, natural resources, education, sanitation and health. In terms of outcomes, this has led to 12,300 new water connections in 12 cities; three treatment plants in Minas, Treinta y Tres, and Durazno, which supply 60,000 people; and 5,300 Uruguayan farmers with greater productive capacity, among other achievements.

Since 2010, the World Bank has approved more than US$ 1 billion in loans to fund investment projects in infrastructure, agriculture, environment and institutional strengthening, in an effort to improve the Government’s capacity to protect the most vulnerable groups from external economic shocks through contingent funding.

Additionally, the World Bank has provided analytical and technical support to consolidate reforms to improve public spending efficiency, expand social program coverage and targeting, and increase the country’s financial inclusion.

The successful results of the following projects reflect the World Bank’s cooperation with different sectors in Uruguay:

  • Climate insurance: Several countries around the world have approached the World Bank in search of a solution similar to that implemented with the Government of Uruguay. In December 2013, the World Bank signed a contract with the energy company (UTE) to provide insurance coverage during the 18 months following the combined risks of drought and high oil prices. The transaction was designed to help the firm compensate for financial losses that could occur in the event of a drought that reduces water volumes in reservoirs supplying electric power plants. This situation would force the company to use thermal power, which is costlier and requires the transport of alternative fuels.
  • Responsible production project. Since 2005, this project has encouraged small and medium-scale Uruguayan farmers to adopt economical, environmentally-sustainable production systems and improved technologies for soil, water and biological diversity management in an effort to contribute to the long-term sustainability of the country’s agricultural development.  To this end, the World Bank provided financial resources and technical assistance to individual farmers or farmers’ groups interested in developing land projects. The project financed 5,300 sub-projects around the country, 86% of which belong to smallholder farmers. Approximately 28,000 people benefited directly from the project, and 600 technicians were trained in sustainable development and integrated natural resource management. The project has coordinated with more than 160 institutions.
  • The Programmatic Reform Implementation Development Policy Loan supported the government program and approved a line of additional financing to cope with the impact of the global economic crisis, with an emphasis on social protection systems. It was the first time that the World Bank issued a local-currency bond for consecutive disbursement of a specific loan. It was also innovative in the sense that the Bank was the first foreign issuer of a public bond in Uruguayan pesos, which reduced the cost of financing and increased public debt diversification and pension fund portfolios.
  • The Foot & Mouth Disease Emergency Recovery Project helped Uruguay to achieve the status of a country free from the disease in 2001 and to recover access to markets in circuits with and without the disease, thereby contributing to the continued profitability of livestock production. About 50,000 livestock breeders benefitted from the project. See related article.
  • The Third Project for Support to Uruguayan Public Schools enabled the creation (by construction and/or rehabilitation) of 170 full-time schools, increasing coverage to 47,000 places. More than half of these schools are located in low-income areas. In 2012, the failure rate in full-time primary schools was 5.7 %, which was below the national average (6.1%).

Last Updated: Apr 20, 2015


LENDING

Uruguay: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments